Three months ago, the big news out of
First Solar (Nasdaq: FSLR) was that the
company, in defense of its
prized German turf, would introduce a rebate program in
the country. Did these rebates make a big impact on
third-quarter results?
The answer to that is a resounding "maybe." As with
SunPower (Nasdaq: SPWRA) and its
high-performance panels, demand for First Solar's
thin-film wares was unquestionably strong in the quarter,
with the company shipping every module it produced.
Management noted that "the rebate program combined with the
market dynamics is facilitating throughput." What are these
dynamics? One is that the third quarter is a strong seasonal
demand period in Germany. On top of this, there are concerns
that the country's newly elected government with slash its
generous
solar subsidy program. That's arguably pulling demand
into 2009.
As for the quarterly numbers, First Solar suffered from a
glaring miss on the top line. $58 million in revenue couldn't
be booked on a project in Canada because
Enbridge (NYSE: ENB) didn't acquire the
20-megawatt project (part of the
OptiSolar pipeline) until October 2nd. This is a matter
of timing only, which suggests that yesterday's sell-off was
an overreaction. Still, this event does highlight how First
Solar's results have gotten lumpier and less predictable as
the company has moved more heavily into the
project management business. Coming from the aerospace
world, First Solar's
new CEOshould be used to taking some lumps.
Looking beyond revenue, the German rebate brought gross
margins down a few pegs, to 50.9% (down from 56.7% last
quarter). As I said
last time out, "the solar shop has a good bit of leeway
in this little price war" thanks to profitability that's
tracking well ahead of the firm's long-term goal. That
remains the case. If anyone sold the stock yesterday on
account of margin declines, they need to revisit the firm's
analyst daypresentation.
While far from being a snorting bull on solar stocks, I'm
still surprised to see top shops being dealt with so savagely
in this otherwise feel-good earnings season. I'm curious to
see how Mr. Market will treat the results of
Trina Solar (NYSE: TSL),
Yingli Green Energy (NYSE: YGE), and
Suntech Power (NYSE: STP) when that trio of
leading Chinese solar outfits roll out their respective
results.
This article was originally published as
First Solar Loses a Few Fanson
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